Sapphire Energy is told banks no longer loan money

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Web exclusive posted March 23, 2009, at 8:49 a.m. CST

Even biofuel companies backed by Bill Gates are no longer guaranteed financial safety. San Diego-based Sapphire Energy, www.sapphireenergy.com a company working to convert algal oil into a synthetic diesel product known as "green crude" said it's still well-positioned to meet production goals but foresees financial issues if the federal government fails to provide financial assistance.

Sapphire Energy Vice President of Corporate Affairs Tim Zenk said the company had a recent conversation with "a very large bank" and was told "I know we technically are a bank but we don't loan money any longer." Zenk declined to name the bank.

"Realistically, as well capitalized as Sapphire is, we do see significant barriers if the U.S. government doesn't see the urgent need for filling the financial gap due to the collapse of the capital markets," Zenk said. "The ability to raise capital in the public markets has all but dried up. Unless the U.S. government fills the void you will very likely see a full-stop on development of all renewable energy projects in the United States."

Sapphire Energy was formed in 2007 and since last year it has been working toward its ultimate goal of producing 1.4 billion gallons of drop-in biofuels by 2020. As of September 2008, the company had raised more than $150 million in investments from various entities including Cascade Investments LLC, which is owned by Microsoft Chairman Bill Gates.

Earlier this year the company signed former BP Global Refining Vice President Cynthia Warner as its president. Under Warner's leadership the company plans to open a test and demonstration facility at Las Cruces, N.M., in May. According to Zenk, plans are also in place to complete an "Integrated Algal Biorefinery" in New Mexico by 2012 which will serve to prove that Sapphire Energy's algal oil can be refined into a replacement for Jet A fuel, diesel and gasoline on a commercial-scale. According to Sapphire Energy's timeline, a 135 MMgy facility should be completed by 2015 followed by a ramp-up to production levels of 1.4 billion gallons per year by 2020. A location for the company's first commercial facility has not been determined, but Zenk said Sapphire Energy is hopeful to build somewhere in the southwest portion of the United States.